VIRGINIA PERSONAL LINES AGENT LICENSING
COURSE
What is insurance? - Answers :Insurance is a social device for spreading the chance of
financial loss among a large number of people. By purchasing insurance, a "person"
shares risk with a group of others, thereby reducing the individual potential for
disastrous financial consequences.
What is insurance based on? - Answers :the law of large numbers; by combining a large
number of homogeneous units, the insurer is able to make predictions of possible loss.
Using the law of large numbers, insurers are able to calculate probable losses and to
establish the rates for premiums that will cover their losses and their operating
expenses.
Declarations - Answers :includes the identity and address of the named insured, the
policy term or period, the amount of insurance or limits of liability, the policy premium,
and any applicable deductibles; include property description and any applicable
deductibles as well as list any endorsements; who is insured, what is insured,
deductibles... etc.
Insuring Agreement - Answers :describes the covered perils, or risks assumed, or
nature of coverage, or makes some reference to the contractual agreement between
insurer and insured; what insurer will cover for you.
Conditions - Answers :set provisions, rules of conduct, duties, and obligations for the
parties; describes things such as the policy period and territory, the insured's obligation
to provide proof of loss, how settlements are handled when other insurance is involved,
and the right of each party to cancel the policy
Exclusions and Limitations - Answers :Exclusions: may describe property , perils,
hazards, or losses arising from specific causes that are not covered by the policy;
Limitations; may eliminate or reduce coverage, but only under certain circumstances or
when specified conditions apply; Exclusions and Limitations: when the insurance
company wont cover you.
Definitions - Answers :Define important terms used in the policy language; explanation
Endorsements - Answers :used to add, delete, or change any of the policy parts; written
modification of the policy; additional coverages to contract --> extra money premium.
Peril - Answers :potential cause of loss
Hazard - Answers :increases the seriousness of a loss or increases the likelihood that a
loss will occur; increased potential of peril
,Direct Loss - Answers :direct consequence of a particular peril (example: fire damage to
an apartment building
Indirect Loss - Answers :loss that is a result of a covered peril but is not caused directly
and immediately by that peril (example: loss of rental income)
Salvage - Answers :If the insurer pays a loss on behalf of the insured, the insurer is
entitled to the salvage to reduce the claim (example: totaled care --> belongs to
insurance company)
Abandonment - Answers :insured cannot simply abandon the property to the insurance
company in exchange for the full-insured value.
What is underwriting? - Answers :the process of selecting certain types of risks that
have historically produced a profit and rejecting those risks that do not fit the
underwriting criteria of the insurer; normally produces a favorable loss ratio
Adverse selection - Answers :assess risk and charge too little; the tendency of insureds
with a greater-than-average chance of loss to purchase insurance
Reinsurace - Answers :a contract of indemnity against liability by which an insurance
company procures another insurance company to insure it against loss or liability by
reason of the original insurance; insurance companies have a company that insures
them
What are the 6 parts of an insurance contract? - Answers :Declarations, Insuring
Agreement, Conditions, Exclusions and Limitations, Definitions, Endorsements
Pair or Set Clause - Answers :if part of a pair or set is lost or damaged, the loss will be
valued as a fair proportion of the total value of the set, giving consideration to the
importance of the damaged article to the set; initial - appraised = payout
Deductible - Answers :Self-insured part of an insured loss, the insured must bear this
loss; amount you pay before insurance comes in --> you are responsible.
Vacancy and Unoccupancy - Answers :Vacancy: building is void of contents and
people; 60 or more days; Unoccupancy: premises are void of people, will not affect the
coverage provided by the policy.
Assignment - Answers :Insurance policy cannot be assigned to another party without
consent of the insurance company
Liberalization - Answers :if the policy or endorsement forms are broadened and no
additional premium is required, then all existing similar policies or endorsements will be
construed to include the broadened coverage
, Binder - Answers :temporary evidence that coverage is in effect until the policy is issued
--> oral or written
Primary Insurance - Answers :in cases where more than one policy is in force, the
primary policy pays first; example: you borrow your friends car and get into an accident -
-> that car's insurance covers you, then you can use your own insurance.
Excess Insurance - Answers :insurance policy that pays benefits only when coverage
under other applicable insurance policies have become exhausted
Accident - Answers :sudden and unforeseen event resulting in a financial loss
Occurance - Answers :continuous or repeated exposure to an event that results in
financial loss; also sudden and unforeseen
Appraisal and Arbitration - Answers :Appraisal: both parties select an appraiser to
determine the value of the loss, appraiser chooses an umpire, each party will pay its
chosen appraiser and bear the other expenses of the appraisal and umpire equally;
Arbitration: resolve liability disputes for bodily injury and/or property damage, also used
to settle disputes between insurance companies involving third party liability claims.
Subrogation Clause - Answers :when insurer has paid a covered claim on behalf of the
insured that is caused by another party, the insurance company is entitled to the
insured's right of recovery from the negligent party, AKA "transfer of right of recovery
against others to us"; person who hit you doesn't have insurance, they (insurance
company) go after the other person for what they owe.
Other Insurance Clause - Answers :if insured has other sources of recovery for a
covered claim, this clause is activated.
Certificates of Insurance - Answers :proof of insurance
Transacting Insurance - Answers :any person who has contact with an insured involving
insurance matters should be licensed , personnel that quote, sell, service, offer advice,
explain coverage or adjust claims; agents
Indemnity - Answers :assumes that a claimant should only be restored to the
approximate financial condition that existed prior to the loss, no better or not worse; no
more, no less
Proximate Cause of Loss - Answers :unbroken chain of events that causes a loss, an
event that in natural and continuous sequence produces a loss; everything that
happened because of the loss
COURSE
What is insurance? - Answers :Insurance is a social device for spreading the chance of
financial loss among a large number of people. By purchasing insurance, a "person"
shares risk with a group of others, thereby reducing the individual potential for
disastrous financial consequences.
What is insurance based on? - Answers :the law of large numbers; by combining a large
number of homogeneous units, the insurer is able to make predictions of possible loss.
Using the law of large numbers, insurers are able to calculate probable losses and to
establish the rates for premiums that will cover their losses and their operating
expenses.
Declarations - Answers :includes the identity and address of the named insured, the
policy term or period, the amount of insurance or limits of liability, the policy premium,
and any applicable deductibles; include property description and any applicable
deductibles as well as list any endorsements; who is insured, what is insured,
deductibles... etc.
Insuring Agreement - Answers :describes the covered perils, or risks assumed, or
nature of coverage, or makes some reference to the contractual agreement between
insurer and insured; what insurer will cover for you.
Conditions - Answers :set provisions, rules of conduct, duties, and obligations for the
parties; describes things such as the policy period and territory, the insured's obligation
to provide proof of loss, how settlements are handled when other insurance is involved,
and the right of each party to cancel the policy
Exclusions and Limitations - Answers :Exclusions: may describe property , perils,
hazards, or losses arising from specific causes that are not covered by the policy;
Limitations; may eliminate or reduce coverage, but only under certain circumstances or
when specified conditions apply; Exclusions and Limitations: when the insurance
company wont cover you.
Definitions - Answers :Define important terms used in the policy language; explanation
Endorsements - Answers :used to add, delete, or change any of the policy parts; written
modification of the policy; additional coverages to contract --> extra money premium.
Peril - Answers :potential cause of loss
Hazard - Answers :increases the seriousness of a loss or increases the likelihood that a
loss will occur; increased potential of peril
,Direct Loss - Answers :direct consequence of a particular peril (example: fire damage to
an apartment building
Indirect Loss - Answers :loss that is a result of a covered peril but is not caused directly
and immediately by that peril (example: loss of rental income)
Salvage - Answers :If the insurer pays a loss on behalf of the insured, the insurer is
entitled to the salvage to reduce the claim (example: totaled care --> belongs to
insurance company)
Abandonment - Answers :insured cannot simply abandon the property to the insurance
company in exchange for the full-insured value.
What is underwriting? - Answers :the process of selecting certain types of risks that
have historically produced a profit and rejecting those risks that do not fit the
underwriting criteria of the insurer; normally produces a favorable loss ratio
Adverse selection - Answers :assess risk and charge too little; the tendency of insureds
with a greater-than-average chance of loss to purchase insurance
Reinsurace - Answers :a contract of indemnity against liability by which an insurance
company procures another insurance company to insure it against loss or liability by
reason of the original insurance; insurance companies have a company that insures
them
What are the 6 parts of an insurance contract? - Answers :Declarations, Insuring
Agreement, Conditions, Exclusions and Limitations, Definitions, Endorsements
Pair or Set Clause - Answers :if part of a pair or set is lost or damaged, the loss will be
valued as a fair proportion of the total value of the set, giving consideration to the
importance of the damaged article to the set; initial - appraised = payout
Deductible - Answers :Self-insured part of an insured loss, the insured must bear this
loss; amount you pay before insurance comes in --> you are responsible.
Vacancy and Unoccupancy - Answers :Vacancy: building is void of contents and
people; 60 or more days; Unoccupancy: premises are void of people, will not affect the
coverage provided by the policy.
Assignment - Answers :Insurance policy cannot be assigned to another party without
consent of the insurance company
Liberalization - Answers :if the policy or endorsement forms are broadened and no
additional premium is required, then all existing similar policies or endorsements will be
construed to include the broadened coverage
, Binder - Answers :temporary evidence that coverage is in effect until the policy is issued
--> oral or written
Primary Insurance - Answers :in cases where more than one policy is in force, the
primary policy pays first; example: you borrow your friends car and get into an accident -
-> that car's insurance covers you, then you can use your own insurance.
Excess Insurance - Answers :insurance policy that pays benefits only when coverage
under other applicable insurance policies have become exhausted
Accident - Answers :sudden and unforeseen event resulting in a financial loss
Occurance - Answers :continuous or repeated exposure to an event that results in
financial loss; also sudden and unforeseen
Appraisal and Arbitration - Answers :Appraisal: both parties select an appraiser to
determine the value of the loss, appraiser chooses an umpire, each party will pay its
chosen appraiser and bear the other expenses of the appraisal and umpire equally;
Arbitration: resolve liability disputes for bodily injury and/or property damage, also used
to settle disputes between insurance companies involving third party liability claims.
Subrogation Clause - Answers :when insurer has paid a covered claim on behalf of the
insured that is caused by another party, the insurance company is entitled to the
insured's right of recovery from the negligent party, AKA "transfer of right of recovery
against others to us"; person who hit you doesn't have insurance, they (insurance
company) go after the other person for what they owe.
Other Insurance Clause - Answers :if insured has other sources of recovery for a
covered claim, this clause is activated.
Certificates of Insurance - Answers :proof of insurance
Transacting Insurance - Answers :any person who has contact with an insured involving
insurance matters should be licensed , personnel that quote, sell, service, offer advice,
explain coverage or adjust claims; agents
Indemnity - Answers :assumes that a claimant should only be restored to the
approximate financial condition that existed prior to the loss, no better or not worse; no
more, no less
Proximate Cause of Loss - Answers :unbroken chain of events that causes a loss, an
event that in natural and continuous sequence produces a loss; everything that
happened because of the loss
